Cost of running railways doubles to £6bn

Network Rail, the not-for-profit company set up by the Government to replace Railtrack, will reveal tomorrow that the cost of running the railways will surge to £6bn a year for the next three years from the £3bn a year originally expected.

The figures will be set out in Network Rail's business plan, which also reveals that the company plans to cut operating costs by £1.2bn a year. The business plan is expected to say that total spending on the network will now top £27bn in the period from 2001 to 2006.

That compares with the £15bn allowed in the last review by Tom Winsor, the Rail Regulator, for operating, maintaining and renewing the railways over the same timeframe.

The plan will also say that the country has a "fragile and ageing network" and there needs to be a big increase in spending on track renewals and updating signalling equipment.

Network Rail says that to maintain the network in a steady state 500 miles of track a year need to be replaced, but over the next three years it intends to replace 1,000 miles of track each year.

The latest figures will hugely embarrass the Government as Network Rail is supported by a £21bn funding package underwritten by the taxpayer. The Government's Strategic Rail Authority and the Rail Regulator have demanded that Network Rail take urgent action over its costs which some say have run out of control.

The company is expected to acknowledge that its costs are too high and to have included in the business plan proposals to make 15 per cent budget cuts from all head office departments. That should achieve £1.2bn in total annual operating costs over the next three years.

Winsor is currently working on a review of the financing of the network and is understood to be concerned about how efficiently Network Rail is spending its money. He has commissioned studies which show that there is up to 20 per cent variation between different areas of the country in the cost of running certain aspects of the railway.

The regulator is also concerned that, when Network Rail closes tracks in order to do engineering work, much of the closure time is wasted. He has commissioned a study comparing UK working methods with much more efficient practices in Japan.

The line closures lead to temporary speed restrictions and delays. Over the past year Network Rail caused 14m minutes of delays but the business plan will set a target of reducing that figure by 20 per cent to around 11.5m minutes.

Last week Network Rail took further maintenance work back inhouse from contractors. It now maintains around 16 per cent of the total network itself.

A company spokesman said the move would allow Network Rail to develop a better understanding of the maintenance and renewal process. It has no plans to bring further maintenance inhouse.